CIS deductions explained

If you work in construction as a subcontractor, you’ve probably seen CIS deductions coming out of your payments. 

At first glance, it can feel like tax is being taken before you’ve had a proper chance to work out your costs. That’s because, under the Construction Industry Scheme, contractors usually deduct tax from your labour payments before paying you, then send that money to HMRC on your behalf. 

The important thing to know is this: CIS deductions are not always your final tax bill. 

They are advance payments towards the tax and National Insurance you may owe. Once your full income and allowable expenses are worked out through Self Assessment, you may find you’ve paid too much and could be due a CIS tax refund.

RIFT Roundup

• CIS stands for Construction Industry Scheme.
• Contractors usually deduct 20% from registered subcontractors.
• If you’re not registered for CIS, deductions are usually 30%.
• CIS deductions count as advance payments towards your tax and National Insurance.
• You may be able to claim allowable business expenses to reduce your taxable profit.
• Many CIS workers are due a refund because deductions are taken before expenses are considered.
• Your CIS statements are essential records, so keep them safe. 

What are CIS tax deductions?

CIS deductions are amounts taken from a subcontractor’s payments by a contractor and sent directly to HMRC. 

They apply under the Construction Industry Scheme, which covers many types of construction work, including building, repairs, demolition, decorating and certain installation work. 

If you’re working as a subcontractor, your contractor usually deducts tax from the labour part of your payment before paying you. That deducted amount is then passed to HMRC as an advance payment towards your tax and National Insurance. 

This can be confusing because it might feel like you’ve already “paid your tax”. In a way, you have paid some of it upfront, but the final position is only worked out when your Self Assessment tax return is completed. 

That’s where tax refunds often come in. 

How CIS deductions work

The amount deducted depends on your CIS status.

Most CIS subcontractors call into one of three categories:

CIS Status	Deduction
Registered subcontractors	20%
Unregistered subcontractor	30%
Gross payment status	0%

If you’re registered for CIS, your contractor will usually deduct 20% from your labour payments. 

If you’re not registered, they usually deduct 30%. 

If you have gross payment status, contractors pay you without making CIS deductions. You then handle your tax directly through Self Assessment. 

Why am I being deducted 20% under CIS?

A 20% CIS deduction usually means you are registered with HMRC as a subcontractor. 

This is the standard deduction rate for most registered CIS workers. It doesn’t mean you’ll definitely owe exactly 20% tax overall. It simply means HMRC is collecting tax from your payments throughout the year. 

Once your expenses, allowances and full income are taken into account, your final tax bill may be lower than the deductions already made. If that happens, you may be due a CIS tax refund. 

Why am I being deducted 30% under CIS?

If you’re being deducted 30%, it usually means your contractor could not verify you as registered under CIS. 

That can happen if: 

• you haven’t registered for CIS
• your details don’t match HMRC’s records
• your contractor has incorrect information
• there’s an issue with your UTR or business details 

The 30% rate is much higher, so it’s worth sorting quickly. Being deducted at 30% can have a big impact on cash flow, especially when you’re already paying for tools, travel, materials and other work costs yourself. 

What does the contractor do under CIS?

The contractor has several responsibilities under CIS. 

They usually need to: 

• check whether CIS applies
• verify subcontractors with HMRC
• deduct the correct amount from subcontractor payments
• pay CIS deductions to HMRC
• provide CIS statements
• file monthly CIS returns 

For subcontractors, the most important part is receiving and keeping your CIS statements. These show what you were paid and what was deducted. 

What is a CIS statement?

A CIS statement is a record your contractor gives you showing your payment and deduction details. 

It should usually include: 

• the contractor’s details
• your details
• the gross amount paid
• any costs excluded from CIS
• the CIS deduction made
• the amount paid to you 

These statements matter because they are proof of the tax already deducted from your payments. 

You’ll need them when completing your Self Assessment return and when checking whether you’re due a refund. 

Can you claim back CIS deductions?

Yes, you can claim back CIS deductions if you’ve paid more tax than you actually owe. 

This is common because CIS deductions are taken before your full expenses are considered. 

For example, your contractor may deduct 20% from your labour payments throughout the year. But you may also have allowable costs such as tools, fuel, work travel, insurance, phone costs, accountancy fees and protective clothing. 

Once those expenses are included in your Self Assessment return, your taxable profit may be lower than your gross income. If the deductions already taken are higher than your final tax bill, HMRC should refund the difference. 

This is why many CIS workers receive a tax rebate each year. 

Common expenses that you can claim as a CIS worker

CIS workers can often claim allowable business expenses that reduce taxable profit. 

These costs must be for your work and properly recorded. 

Common CIS expenses include: 

• tools and equipment
• repairs or replacement tools
• work mileage
• fuel used for business travel
• public transport for work
• parking and tolls
• protective clothing and PPE
• work phone costs
• accountancy fees
• public liability insurance
• training linked to your trade
• materials you’ve paid for yourself 

The key point is that the expense must be connected to your work. Personal spending, normal commuting and private costs are not usually allowable.

Claimable vs not claimable CIS expenses

Usually claimable	Usually not claimable
Tools	Everyday clothes
PPE	Private travel
Work mileage	Normal commuting
Parking	Personal phone use
Insurance	Fines
Accountancy fees	Family costs
Trade training	Non-work purchases

This is a simple guide, not a rulebook. The details matters, especially if an expense has both business and personal use.

How CIS deductions affect your Self-Assessment tax return

If you work under CIS, you normally need to complete a Self Assessment tax return. 

Your return is where you report: 

• your income
• your CIS deductions
• your allowable expenses
• any other taxable income
• your final tax position 

HMRC then compares your final tax bill with the CIS deductions already taken. 

If you’ve paid too much, you receive a tax refund. 

If you haven’t paid enough, you’ll need to pay the difference.  

What records should CIS workers keep?

Good records make CIS tax much easier to manage. 

Try to keep: 

• CIS statements
• invoices
• receipts
• mileage logs
• bank statements
• tool purchase records
• insurance documents
• fuel records
• subcontractor payment records, if relevant 

You should also keep details of any other income, especially if you do extra work outside CIS. 

The better your records, the easier it is to claim everything you’re entitled to and avoid problems if HMRC asks questions. 

What happens if you lose a CIS statement?

Don’t panic. If you’re missing a CIS statement, start by asking your contractor for a replacement. They should have a record of payments and deductions.

If that’s not possible, you may be able to reconstruct the information using:

• invoices
• bank statements
• remittance advice
• payment records
• your HMRC online account 

It’s always better to build the clearest evidence trail you can rather than guess.

How do you avoid CIS deductions? 

If you don’t want deductions taken in advance, you can apply for gross payment status. 

Gross payment status means your contractor pays you in full, without deducting CIS tax first. You then pay your tax and National Insurance directly through Self Assessment. 

This can help cash flow, but it also means you need to be organised. The tax is still due, it just isn’t being collected upfront. 

What is gross payment status? 

Gross payment status is when a CIS subcontractor is paid without CIS deductions. 

To qualify, HMRC needs to be satisfied that: 

• your business is run properly
• your tax affairs are up to date
• your turnover meets the relevant test
• you can be trusted to pay your own tax on time 

Gross payment status can be useful, but it isn’t right for everyone. If you’re not setting money aside during the year, you could face a larger tax bill later. 

Can CIS deductions be claimed from previous years?

CIS and making tax digital 

How long does a CIS tax refund take?

Timelines vary, but HMRC refunds can take several weeks depending on the complexity of your claim, the time of year and whether more evidence is needed. 

CIS refunds may take longer if:

• CIS statements are missing
• expenses need checking
• figures don’t match HMRC records
• the claim covers several tax years
• the return is submitted during a busy period 

How long does a pending tax rebate take?

Common CIS deduction mistakes

CIS tax can be easy to get wrong, especially when you’re focused on getting the job done and keeping work moving. 

Common mistakes include: 

• not registering for CIS and being deducted at 30%
• losing CIS statements
• forgetting to claim expenses
• mixing business and personal costs
• assuming deductions mean your tax is fully sorted
• missing Self Assessment deadlines
• not checking whether you’re owed a refund 

A little organisation throughout the year can save a lot of stress when your tax return is due. 

CIS deductions FAQs